Law of Demand and Supply
Definition:
Demand and supply involve goods and services, where consumers (demand) and producers (supply) agree on a certain price level to buy and offer goods and services.
Influencing Factors:
Demand:
1. Income
2. Prices of other goods
3. Population size
4. Taste and preferences
5. Market size
6. Future expectations
Supply:
1. Production costs
2. Prices of other goods
3. Technology
4. Population size
5. Producer expectations
6. Taxes
Law of Demand and Supply:
If the price increases, the quantity demanded decreases, and vice versa.
If the price increases, the quantity supplied increases, and vice versa.
Movement of Demand and Supply Curves:
Movement of Demand Curve:
Occurs along the curve due to changes in the quantity demanded caused by changes in the price of the product.
Only influenced by the price of the product itself.
Movement of Supply Curve:
Occurs along the curve due to changes in the quantity supplied caused by changes in the price of the product.
Only influenced by the price of the product itself.
Shifts in Demand Curve:
Occurs due to changes in the quantity demanded caused by factors other than price, such as income, prices of other products, tastes, population size, etc.
Shifts in Supply Curve:
Occurs due to changes in the quantity supplied caused by factors other than price, such as production costs, technology, an increase in the number of producers, etc.
Curve Shift Table:
Shift in Demand Curve:
Increase: Curve shifts to the right.
Decrease: Curve shifts to the left.
Shift in Supply Curve:
Increase: Curve shifts to the right.
Decrease: Curve shifts to the left.
